The threat of deflation eased across the eurozone in February following a bounce back from heavy price discounting and steeply declining oil prices during the previous month. The 19-member currency bloc saw prices drop 0.3% last month compared with a drop of 0.6% in January, alleviating fears of an alarming deflationary spiral.
Unemployment also fell slightly to give Brussels a double dose of mildly positive economic news ahead of the European Central Bank’s meeting later this week in Cyprus, where it is expected to give further details of a €1.1tn stimulus programme.
The jobless rate dipped to 11.2% from 11.3% in January, continuing a slow but steady fall that began in late 2013. But apart from a recovery in the first half of 2011, the rate has been at or above 10% since late 2009.
Other data showed that the eurozone manufacturing sector remained lacklustre, with several countries lagging badly behind the rest, giving economists a reason to stay pessimistic about the prospects for a strong recovery in the next year.
Chris Williamson, chief economist at financial data provider Markit, said: “The eurozone manufacturing sector barely expanded in February, highlighting the malaise that still hangs over the region’s goods-producing economy as a whole. However, beneath the disappointing headline figure, different parts of the manufacturing economy are clearly moving at very different speeds, ranging from a [Irish] boom to a [French] slump.”
France suffered 10 months of contraction after shrinking at a faster pace in February, according to the Markit purchasing managers’ index (PMI) survey. The French manufacturing PMI fell to 47.6 last month from 49.2 in January. A reading above 50 indicates expansion.
The malaise that has struck French manufacturing industry has distracted from a strong recovery in Spain, where the factory sector posted its fifteenth month of growth. The monthly Spanish manufacturing PMI came in at 54.2, slightly down on January’s 54.7, but still showing a rise in activity. New export orders rose at the fastest pace in almost eight years.
Germany posted a modest PMI of 51.1, while Italy saw its factory sector grow for the first time in five months. The Italian manufacturing PMI jumped to 51.9, up from 49.9.
The more stable economic outlook contrasts with the volatile political climate that has brought the new radical leftist government in Greece into conflict with Brussels. Jeroen Dijsselbloem, the Dutch finance minister who heads the eurozone negotiations with Greece, said that the “first disbursement” of the €7.2bn remaining in Athens’ €172bn bailout could be released this month.He said it would allow Athens to pay this month’s debt demands, including €1.4bn owed to the IMF.
Dijsselbloem told the Financial Times: “My message to the Greeks is: try to start the programme even before the whole renegotiation is finished. There are elements that you can start doing today. If you do that, then somewhere in March, maybe there can be a first disbursement. But that would require progress and not just intentions.”
Greece’s parliament is due to debate four draft laws this week; tackling the “social impact” of the country’s austerity programme.
Finance minister Yanis Varoufakis has rebuked Brussels for imposing austerity as the price of the bailout package and in response to the Dutch politician indicated that there could be further battles ahead. Varoufakis said he would refuse the €7.2bn if it came with strings attached, such as demands to impose further austerity.
